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Originally Posted by rand
You are only considering one side of the coin. You are right in that that is how it is taught in kindergarten economics. But the fact of the matter is that the mal-investment in fracking is not a good thing.
You manage to be wrong about nearly everything. How is this possible?
The investing in fracking is a wonderful thing. It's brought cheap US energy for the foreseeable future (actually compensating for ******ed, wealth destroying government investment in solar/wind), and solved the oil crisis, which would be choking off some growth due to high prices right about now.
Fracking was a wonderful thing. It was the free market overcoming a problem (increasingly expensive/under supplied transportation energy).
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My friend O.A.F.K.1.1 is right, it is all about interest rates. Interest rates are fundamentally mispriced by definition because the market is not determining them through supply and demand for debt.
Interest rates have nothing to do with the global commodity boom (and its subsequent crash). Take iron ore for example. Went up 5x and now crashing. Interest rates didn't cause that. China did.
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With interest rates artificially depressed there is malinvestment everywhere, not just in fracking. It is not a good thing.
Firstly, fracking isn't malinvestment. Secondly, what else is being mal invested in?? Money flowing to S&P 500 companies through cheap financing is a good thing. They are the most capable capital allocators. Would it be better in a housing bubble? Low end consumption? Money is going exactly where it should if you want the economy to boom.
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There is something natural and healthy about boom bust processes. But that is the whole idea (or at least half of it, the half the public is taught) of Keynessian economics. You suppress things when they get "too hot" and you stimulate them when they get "too cold."
Of course there is no empirical way to know when that is the case. Because things are "too cold" in the eyes of the Fed they have "stimulated" the economy by lowering rates through policy and QE.
They have no idea what they are doing.
I completely agree that government/fed interventions in the market are near useless and possibly harmful. The free market routes around them. They interfere with free market processes, to some degree. We would probably have a stronger recovery from 2008 if not for the fed (Obama's clownish "best case vs stimulus case" just highlights how clueless they are).
But the above has nothing do with whether commodities are going to keep going up after 2011 as Boroclown predicted.
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Best not to mess with things you don't understand and leave well enough alone. There is nothing wrong with free markets or capitalism. There is something wrong with the US (and most) government(s) and their need for the near infinite funding power of fiat currency.
Of course there is. But free markets route around interference. It amuses me greatly when people (particularly Austrian purists) think free markets can solve all problems except the problem of government monetary interference. Free markets route around that perfectly well also.
It all works, man. You just need to relax. The only thing that can make a mess is massive debt, or permanent shift of productive capital and know how to closed external countries (such as China). They are both happening, but far from a level which is going to disaster for a very long time yet.
